FEDERAL COURT OF AUSTRALIA Fubilan Catering Services Limited (Incorporated in Papua New Guinea) v Compass Group (Australia) Pty Ltd [2007] FCA 2111 FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) AND MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) v COMPASS GROUP (AUSTRALIA) PTY LTD AND EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) AND COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM WAD 169 OF 2007 SIOPIS J 20 NOVEMBER 2007 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 169 OF 2007 BETWEEN: FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) First Appellant MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Appellant AND: COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Respondent EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Respondent COMPASS GROUP PLC (INCORPORATED IN UNITED KINGDOM) Third Respondent JUDGE: SIOPIS J DATE OF ORDER: 20 NOVEMBER 2007 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The appellants provide security for costs by way of a bank guarantee in the sum of $95,000, by 20 December 2007. 2. The matter be listed for directions on 21 December 2007 at 2.15 pm. 3. There be liberty to the parties to apply. 4. Leave be granted to the appellants to amend the Notice of Appeal filed 30 August 2007 in terms of the Minute of Amended Notice of Appeal filed 19 November 2007. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 169 OF 2007 BETWEEN: FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) First Appellant MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Appellant AND: COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Respondent EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Respondent COMPASS GROUP PLC (INCORPORATED IN UNITED KINGDOM) Third Respondent JUDGE: SIOPIS J DATE: 20 NOVEMBER 2007 PLACE: PERTH REASONS FOR JUDGMENT 1 The appellants have appealed against the whole of the judgment of the primary judge which was handed down on 9 August 2007. The trial lasted for 22 days. There were 25 witnesses and more than 16,000 pages of transcript and over 500 exhibits. The appellants relied upon 18 different causes of action and lost in respect of every cause of action. The respondents have brought a motion seeking security for costs. 2 The appellants are companies incorporated and carrying on business in Papua New Guinea and are, therefore, resident outside of Australia. 3 One of the considerations to be taken into account in determining whether security for costs should be ordered is that the appellants are ordinarily resident outside of Australia. (Order 28 r 3(1) of the Federal Court Rules (the Rules).) French J ordered that the appellants provide security for costs in respect of the first instance proceeding. 4 In resisting the application for security for costs, the appellants advanced a number of arguments. First, it was contended that the making of any order for security for costs would result in the delay of the matter going to hearing in the February 2008 list. It was said that the obtaining of the bank guarantee, which is the form of security sought, would be burdensome and result in delay. In support of this contention, counsel for the appellants referred to the history of difficulty and delay in organising the provision of security for costs in compliance with the orders made at first instance. That evidence does not permit me to infer that if I was to order security for costs be given by way of a bank guarantee in respect of the appeal, that there would be the same difficulties and that this would result in the delay of the hearing of the appeal. There could be a number of explanations for the delay that occurred in relation to providing security in respect of the first instance hearing. 5 Counsel also relied upon the evidence in an affidavit from Mr Curlewis, solicitor for the respondents, about the difficulties in enforcing judgments in Papua New Guinea. However, the evidence from Mr Curlewis did not deal with the question of how long it would take for the appellants to obtain a bank guarantee, and that evidence was confined to the question of how long it would take to enforce a judgment in Papua New Guinea and how long it would take to disburse funds from Papua New Guinea. 6 Secondly, it was submitted that I should not order security for costs for the appeal because it would not spare the respondents, even if successful in the appeal, from having to enforce a judgment in Papua New Guinea. This was because the amount of security for costs which had been ordered in respect of the trial costs was inadequate. It was, therefore, going to be necessary for the respondents, in any event, to enforce a judgment in Papua New Guinea for costs against the appellants for their trial costs, even if they were successful in the appeal. 7 I find that an unattractive argument. The main object of an order for security for costs is to prevent the beneficiary of a security for costs order from having to embark upon that course of action. The fact that it is necessary to do so in respect of the trial costs, is no reason to aggravate the situation by not ordering security for costs in respect of the appeal. 8 The third argument which was advanced by the appellants was that the provisions of a management agreement between the respondents and the appellants are such as would permit the respondents to disburse funds to themselves from the bank account which is maintained and controlled by them pursuant to the management agreement. Therefore, it is said that the respondents would not be at risk if they did not get the benefit of the security for costs order for the appeal. 9 I also have difficulty with that argument because it presupposes that the terms of the management agreement would permit the deduction from that bank account of something as unusual as a costs order in litigation. In my view, a costs order is something which is a sui generis and it is not immediately apparent that a management agreement would usually permit a party in the position of the respondents to use the bank account in that manner without the consent of the appellants. 10 It was then put to me that O 52 r 20 of the Rules contemplates a different weighting in respect of the grant of security for costs in respect of an appeal as opposed to an application at first instance. 11 I accept that O 52 r 20 of the Rules does implicitly provide that the Court would be less inclined to order security for costs in respect of an appeal than in respect of an application at first instance. However, in my view, all it does is effect a differential in the weighting of the various elements which one takes into account. It certainly does not mean that the matters which are relevant at first instance, such as the fact that the appellants are resident out of Australia, cease to be relevant. 12 In one of the judgments which was referred to, Energy Drilling Inc v PETROZ NL [1989] FCA 184, Gummow J observed that although it is a relevant factor, it does not automatically follow that because a person is an ordinary resident out of Australia that security must be granted against that person, but that the object of the rule, when the discretion is properly exercised, is to provide a fund within Australia so as to avoid the risks and uncertainties associated with attempting to enforce a judgment in the applicant's jurisdiction. 13 As to the question of the merits of the appeal, I adopt the following observations of French J in the case of Carey‑Hazell v Getz Bros & Co (Aust) Pty Ltd [2004] FCA 1334 at [30]‑[32]: Burchett J said of O 52 r 20 in Paton v Campbell Ltd [1993] FCA 449: It is plain from the manner in which that rule is expressed that there is a discretion, but that there is something of an onus resting upon one who says that an appellant must be required to provide security. A feature of an appeal, which marks it out from litigation at first instance from this point of view, is that there has already been a decision given by the judge who heard the matter at first instance, and that the appellant has, in other words, had a day in court, has had an opportunity to present his case and has had a ruling which may be presumed to be correct. His Honour went on to observe that it is unreal to ignore the reality that a significant proportion of appeals succeed. He referred to decisions of the Court of Appeal of New South Wales illustrating the proposition that there is a discretion to require the giving of security where the Court is of the view either that the appeal is without real merit or substance or that the issues sought to be litigated in the appeal is not one of great importance to the appellant while the prospect of the respondent being left without remedy in respect of a costs order is significant. Security may not be ordered when an appeal is brought in good faith and raises a substantial question of law – J & M O'Brien Enterprises Pty Ltd v The Shell Company of Australia Limited (No 2) (1983) 70 FLR 261 at 264 (Bowen CJ); Lucas v Yorke (1983) 50 ALR 228 at 229 (Brennan J). But where the appeal turns largely on questions of fact and gives rise to no important question of law, the position may be different – Cummings, JB v Lewis, MT & Ors [1991] FCA 772. There is no set of clear rules to resolve the question whether security should be ordered in a particular case. The Court is required to have regard to all the circumstances of the case in exercising what is undeniably a broad discretionary judgment. 14 I now turn to weigh the factors. First, I take into account that the appellants are not ordinarily resident in Australia and that there are difficulties associated with enforcing judgments in Papua New Guinea. That is a circumstance to which I give considerable weight. 15 Secondly, I also take into account that the weighting is different when one comes to consider an appeal and that the Court is less inclined to grant security in those circumstances. 16 Thirdly, I also consider the question of the merits of the appeal. 17 The first eight grounds of appeal seek to impugn various individual findings and rulings made by the Court at first instance. They go to questions of construction, findings of fact, whether on the facts, the Court should have found that a fiduciary relationship existed, and whether the appellants could amend their pleading during the course of the trial. I accept that there may be some merit in these grounds, but I am not in a position to say positively whether this is so or not. However, in my view, none of these grounds raises an important question of law. 18 Ground 9, which is relied upon as a basis to have the whole judgment set aside, alleges that there can be no confidence accorded to the judgment because the trial was of a substantial duration and it took the primary judge 11 months to deliver his reasons. 19 It is obvious that this ground of appeal is fashioned on the grounds of appeal in the case of Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273 (Mt Lawley). There is a great similarity in the wording used in the grounds of appeal in both cases. There is, however, a substantial difference between the facts in Mt Lawley and in this case. The holding in Mt Lawley, that no confidence could be placed in the judgment, was based on the relationship between the length of the trial, the long delay in handing down that decision and the paucity of the reasons which were subsequently given. In Mt Lawley the trial lasted for four months, the judge delayed 26 months in delivering his reasons and the reasons went only to 24 pages of text. In this case, the trial lasted 22 days, the primary judge had to deal with 18 pleaded causes of action, and after 11 months delivered judgment which ran to 236 pages. In my view, the difference between the Mt Lawley case and this case is very stark. This reflects adversely on the merits of this ground of appeal. 20 I give due weight to O 52 r 20 of the Rules. I give only limited weight to the merits of the appeal as a factor, because of the adverse view that I have as to the merits of the Mt Lawley ground, and the fact that the other grounds relied upon do not raise any important questions of law. I am of the view that these factors do not overcome the weight of the fact that the appellants are resident out of the jurisdiction, and that there are attendant difficulties with enforcement of costs orders in Papua New Guinea. In those circumstances, it is my view, that security for costs should be ordered. 21 However, I will not at this stage order that the appeal be stayed pending the provision of the security for costs. I certify that the preceding twenty‑one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 12 February 2008 Counsel for the Appellants: Mr A Rumsley Solicitor for the Appellants: Mr A Rumsley Counsel for the First, Second and Third Respondents: Mr ML Bennett Solicitor for the First, Second and Third Respondents: Lavan Legal Date of Hearing: 20 November 2007 Date of Judgment: 20 November 2007